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The New Party News

News from the New Party

Thursday, March 22, 2007

The Chancellor's iron grip - on power

It would be good to think that yesterday's headline-grabbing budget measures meant that the Chancellor was a convert to the tax-cutting cause.  Unfortunately, as ever, Gordon Brown proves to be first and foremost a politician with a penchant for using the public finances as his levers of power.

On income tax, the cut in the basic rate from 22p in the pound to 20p is to be welcomed, but it goes alongside a less-noticed hike in the starting rate from 10p to 20p.  This is not, by the way, a move towards 'flat taxes' but merely the undoing on one of Gordon Brown's previous measures.  Proponents of the flat tax argue for an increase in personal tax thresholds to remove the lower paid from income tax completely, whereas the Chancellor has mired the poorest in even more tax.

Similarly, the cut in corporation tax from 30 to 28 per cent is largely nullified by the realisation that the small business rate is going up from 19 per cent to 22 per cent.  The prospects for new and emerging businesses look bleaker following the budget and, as Jeff Randall notes, the Chancellor is doing nothing about the £40 billion per year compliance cost of red tape (estimated by the British Chambers of Commerce).

And so it goes on, with a series of tax increases behind the headlines.  Whether the justification is "fairness" (class envy) or "the environment" (scare tactics).

The binge at the taxpayers' expense has not stopped.  The NHS continues to get lavish increases in funding despite the growing evidence that it is going into a black hole, rewarding inefficiency and waste.  Now education is to get the same treatment apparently.  Health and education spending should not be seen as good in its own right - we need serious reform and more efficient services so that money is properly spent.  As it is, any challenge is met with the scare that health and education services will be "cut".  The government seeks to turn us all into public spending junkies, and it looks like far too many are already addicted.

Janet Daley, writing in yesterday's Telegraph, made the point that more money with centralised services will just created a spiral of unintended consequences.  It would be far better to give the money to the patients and parents, in the form of vouchers, to determine how the money should be spent:

There is a hopeless spiral of unintended consequences here. In order to deal with the problems created by its failures in central planning, government has to seize more and more power over medical decisions and staff appointments. This results in even less autonomy at the local level where there is knowledge of patient need, so more mistakes of planning and judgment are made. Moral of the story (and it clearly applies to education, too): public services cannot be reformed from above. That is, by impersonal, mechanistic government diktat.

They can only be made more responsive to the needs of patients and parents by allowing those who use the services to have some power of purchase in the form of a voucher - or if you don't like that word, a capitation allowance - in which funding would follow the consumer and the terms of service could be a matter for mutual agreement with the individual hospital or school.

The ever-expanding reach of government is evident too in the rising dependency on tax credits, the mechanism through which the government is turning average earners into its welfare clients while pretending to be doing the opposite.  It is a classic example of social engineering through which the government hopes to turn Britain permanently into a social democratic state in which the private, wealth-creating sector plays a secondary role.

When the government becomes the major source of income for a substantial proportion of the population, any pretence at personal freedom and democracy is gone.  Just as importantly, we will have lost the culture of enterprise and personal initiative that the Chancellor keeps talking about - and upon which future economic benefit, and spending, must depend.